A Harvard history instructor and a Cambridge contractor have developed a new plan for urban rehabilitation which could become the basis for resumption of an urban renewal program for the City.

Sam B. Warner Jr. said yesterday that he and Alfred B. Cohen have received encouragement from several Washington officials for a program which would enable low income families to rehabilitate their homes with full subsidies from federal and city funds.

Warner stressed that rehabilitation of existing structures will eliminate the problems of relocating families. Controversy over relocation led the City Council last spring to vote down the Donnelly Field project, action which cost Cambridge almost $6 million in Federal urban renewal funds.

"Under the Housing Act of 1949," Warner claimed, "the Federal government could arrange to pay two-thirds and the City one-third of rehabilitation costs."

Attacks Existing System

Warner attacked a popular existing system, under which Federal Housing Authority loans are offered to low income homeowners. "Since these low income families often can't meet normal expenses, why impose a further burden?" he asked.

Warner also charged Cambridge officials with "indecision" on the whole urban renewal question. "City leaders really don't know if they want urban renewal at all," he declared, and "then they can't decide if it should be in the form of rehabilitation or reconstruction."

Explanation Being Prepared

At present, Warner and Cohen are preparing a detailed explanation of their plans and talking to City officials. Action on their proposal is not expected for several months, and Warner sees opposition only from "the usual budget cutters."

Any money that can be raised would probably be used to sponsor a pilot program in Cambridge.